Budget measures to cut red-tape, simplify VAT and reduce the burden of accounts preparation for up to half a million firms yesterday won a rare cheer for the chancellor from the small business lobby.

In a radical simplification of the VAT structure, small businesses with turnover below £100,000 will no longer have to keep every invoice and transaction to calculate their VAT liability. Instead, their VAT bill will be calculated as a percentage of turnover. The VAT threshold - the point at which small businesses have to be registered and charge their customers VAT - was also increased in line with inflation to £54,000.

Steven Alambrites of the Federation of Small Businesses said: "VAT has always been a major burden on small businesses, and firms such as hairdressers and small shops won't now have to keep every bill and invoice. It will save a lot of paperwork."

But the biggest surprise was an overhaul in the way that small businesses will be able to send in their accounts.

Mr Brown said: "Last year we exempted small businesses from the costly obligation to submit audited accounts, cutting small business costs by £220m. The next step is an even more radical proposal; to make the annual company accounts the basis for calculating tax, thus cutting more red tape and costs once again."

In effect, the measure treats small businesses in a similar way to individuals filling in a self-assessment form; firms will be able to send in their accounts and have the taxed worked out on them by the Inland Revenue, rather than having to employ an external accountant to calculate the figures.

Inland Revenue says it will shortly begin consultation with small businesses on the proposals, which it says will significantly reduce the complexity of the tax system for small businesses.

In a concession to creative artists, authors and composers whose incomes vary markedly one year to the next, the Revenue said it would allow them to average their income for tax purposes over two years, which will enable many to cut their tax take from 40% to 22%.

The Federation of Small Businesses praised measures to expand places under the modern apprenticeships scheme.

The federation said: "A lot of small businesses can't afford training or fear that their trained staff will simply be poached, so the tax credit for training is very welcome."

The DTI said it would spend £1bn increasing the number of apprenticeships from 220,000 this year to 320,000 over the next few years.

Small businesses also welcomed the competition commission's findings that they pay excess bank charges, which the chancellor endorsed in his speech yesterday.

Mr Alambrites said: "Small firms are constantly undermined by the supernormal profits that the big banks make by charging loan rates of 4-5% above base rate.

But the chancellor needs to stop negotiating with the banks and instruct them to do something."

However, a separate small business lobbying group, the Forum of Private Business, was less enthusiastic about the Budget.

The forum's executive chairman, Stan Mendham, said: "The accounting simplification and VAT changes are all good, but he has done nothing about the biggest gripe for small businesses - the uniform business rate. There were also no exemptions for small employers facing employment regulations."

Measures such as improved maternity pay and maternity leave put an especially heavy burden on small employers, which, although they are eventually reimbursed by government, have to carry administer and initially pay for the schemes, putting pressure on their cash flow.